At the end of the day,in the comment section of the daily predictions we write our overview for the next market day, andoccasionally westate our preference for overnight positions.

As we are very conservative traders we do not always write preferred direction, as we estimate the risk of holding those positions overnight higher than normal. But that does not mean, that we do not havepreferred direction at all in our mind, as wego through our decision making process.

That decision making process will be detailed in these series of blog entries,tohelpothers see, how we get to our conclusions, andto make possible for others to make their decisions on their own based on the available data.

Solving a complex puzzle:

The decision-making process is very straightforward, but it contains both objective andsubjective components, andthis process isnot caved in stone. It isstill evolving, and it is changing dynamically as the market changes and our knowledge about the market mechanizm changes.

There are fourvery besic pillarsof this decision making in decreasingimportance.

1. The analysis of the currentprediction data puzzle.This alone might take a few minutes for beginners, seconds for experienced users. In this process we analize the Daily, Weekly, Monthlypredictions forall six major US indices, and the Omega predictions for the NASDAQ / NASDAQ100 and the S&P500 indices.Forthe predictionwizard visitor this 20 data is like a ton of information, that need to be weighted in our decision making process.For us the picture even more complex, as we have 18 separate internal data for each predicted index, making the total number of data 18* 18 + 2 = 326.Since this decision making process is like the analysis of a chess game situation, we need to knowand take into account statistical data, that we plan to detail.

2. The second most important considerationin the decision making process is the analysis of current market conditions.It is a kind of classical technical anaysis, that eithersupporting or contradictingthe prediction picture, the result of the firstprocess.

3. The next factor in the decision making processis our state of knowledge about the market andthe systems we have and use every day, whichmakes our decision subjective, even though we try to stay on objective ground as much as possible.

4. The last factor in our decision making process is the evaluation of the scheduled news (Mainlyeconomic news, like GDP, PPI... eco data, profit reporting data coming into the market before the next market open...)

With alittle bit of experienceall this decision making process takes a few minutes, usually less than 4-5 minutes, and part of the process can be completedeven before running the predictors and analyzing the puzzle, just by watching the market behavior thoughout the day and completingclassical technical analysis.

The final outcome of the decision for us will bethe opening of a position of a specific size in a specific direction or not opening any position at all. Others with different experience, different risk tolerance and different weights in their decision making process might come to completelly different conclusion.

Depending on preferenceand confidence leveltheoretically the position opening process could be completelly automated, semi automated orit could be completelly intuitive.

Some professionals argue, that the actual position opening is notvery important for the overall results of a market player. We do not share that view, as it might be because those, who say that probably have no or littlke edgein predicting future market direction, theyfocus on position management or position closing exclusively.Those are also important, and can add to the bottom line in case of the predictionwizard player.

As apredictionwizard player, who intend to reap the benefitsofthe predictor system,has to have answer forthe following very important question:

What will suggest to me to initiate an overnight position? (In some cases to close existing position before the next market open.)

The answer could be many, like the followig examples:

- Yes open position, Ifa certain Daily prediction for the next day for my preferred index has a win probability, greater then X [%], X beingdetermined by the market player.

- Yes open position, Ifa certain Daily prediction for the next day for my preferred index has a win probability, greater then X [%], X beingdetermined by the market player. At the same time the predictor for the other major index point to the same direction.

- Yes open position, Ifa certain Daily prediction for the next day for my preferred index has a win probability, greater then X [%], X beingdetermined by the market player. At the same time the Omega predictionfor the same index must point in the same direction.

- Yes open position, If both Daily, weekly predictions point in the same directon, and the Omega predicton also supports that.

- Yes open position, Ifthe calculated win probability is greater than a specified minimum limit and there is no blocking condition. (Like incoming GDP data the next moring...or something else that you decidednot to trade)

The more stringent requirements we define for position opening, the less trade we might have during a year, and the less overall profit could be reached. There isan optimum solution somewhere, by which we can maximize our yearly profit potential.

The next question the trader need to answer:

Havingmade a decision about position opening,how can Iselect the good position size?

And the answer could vary, depending onthe way, we approach the market. Some examples:

- The position size will be a pre-specifiedportion [%] of the account size.

- The position size will be set intuitively.

- The position size will be calculated, based on expected Win probability.

- The position size will be calculated, based on expected Win probability, adjusted by the impact of recenttrading results of these kind of trades.

- The position size will be calculated, based ona complex set of rules, whichincludes the estimated win probability, and depend on current market volatility.

- The position size will be calculated, based onestimated win probability, current market volatility, and Gappiness of the recent market activity in the past 3 – 6 weeks.

By the time of these blog entry series completed, hopefully You will be better prepared to make a more informed decisionand give the best answer for the above mentioned two questionsduring your market participation.